What's Spooking Investors in the Stock Market Today

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The stock market today is down more than 200 points as China fears trigger a global sell off.

In mid-morning trading, the Dow dived 205.75, 1.39%, to 14,593.65. The S&P 500 slumped 25.78, 1.62%, to 1,566.65. The Nasdaq slid 50.78, 1.51%, to 3,306.47. The Dow and S&P are now off some 5% and 6% respectively from their all-time highs reached earlier this year.

Asian markets were clobbered Monday and European markets melted on increasing fears of a liquidity crunch in China. Major Euro indexes, off roughly 10% from their April highs, are officially in bear territory.

Today's moves continue the rollercoaster ride U.S. equities were on last week, with the Dow shedding 560 points, or 3.66%, over Wednesday and Thursday.

The blue-chip benchmark finished at 14,799.40, down 1.8% for the week, its worst week since April 19. The S&P 500 fared worse, slumping 2.1% last week to end at 1,592.43. The Nasdaq ended at 3,357.25, for a weekly loss of 1.9%.

The VIX, or the CBOE Volatility Index, soared 10.2% last week, ending at 19. Wall Street's "fear gauge" has risen four of the past five weeks, ever since Fed Chief Ben Bernanke's first mumblings about a probable winding down of stimulus.

Monday morning, the VIX jumped 2.14, or 11.23%, to 21.04, its highest level of the year.

Markets were goosed Friday after The Wall Street Journal's Fed watcher Jon Hilsenrath wrote that investors may be misreading optimistic messages sent by the Fed Chairman Ben Bernanke as hawkish.

Also, Goldman Sachs (NYSE: GS) analysts said their top recommendation for 2013 is still to buy stocks and sell bonds.

"We continue to expect the index [S&P] will close the year at 1,750, a rise of approximately 10% from today's top level. However, median historical drawdown episodes suggest at some point during the next six-months that the S&P may decline to mid-1,500s before resounding to our year-end target," Goldman's analysts wrote.

Further giving stocks a lift was a bullish statement to CNBC from renowned hedge fund manager David Tepper, founder of Appaloosa Management: "All the concerns in the markets is because the Fed sees the economy stronger in the future. In fact, their forecast shows that they will wait until a lower unemployment rate (closer to 6% than 6.5) to raise interest rates. So they are a bit easier on the front...I obviously thought they should start to taper. [But] the bottom line when the dust settles [is that the] only one place to be [is] stocks."

Stock Market Today Newsmakers

  • Tenet Healthcare Corp. (NYSE: THC) agreed to buy Vanguard Health Systems Inc. (NYSE: VHS) Inc. in a deal valued at about $4 billion. Tenet will pay $21 in cash per Vanguard share, a 70% premium to Friday's close of $12.37. THC rose more than 10%, while Vanguard gained better than 66%.
  • Apple Inc. (Nasdaq: AAPL) dropped 2.53% after Jefferies cut its price target to $405 from $420 saying the tech giant may slow iPhone production.
  • Facebook Inc. (Nasdaq: FB) fell 3.38% after admitting in a blog post late Friday a bug exposed personal contact information of approximately 6 million FB users.
  • Microsoft Corp. (Nasdaq: MSFT) and Oracle Inc. (Nasdaq: ORCL) are set to announce a new partnership Monday expected to involve cloud computing.
  • Starbucks Corp. (Nasdaq: SBUX) slumped 1.68% after the retail coffee king paid its first corporation tax in the U.K. since 2008 following strong criticism from lawmakers.

What to Watch This Week

The earnings calendar remains light, but several big name companies are on tap to report. U.S. housing and factory data, plus comments from a parade of Fed speakers could also sway markets.

Tuesday: Consumer confidence; durable goods orders; new home sales; S&P Case-Shiller housing index; earnings from Barnes & Noble Inc. (NYSE: BKS) and Walgreen Co. (NYSE: WAG).

Wednesday: Gross domestic product; earnings from Bed Bath & Beyond Inc. (Nasdaq: BBBY), General Mills Inc. (NYSE: GIS) and Monsanto Co. (NYSE: MON).

Thursday: Initial jobless claims; personal income and spending; Kansas City Federal Reserve manufacturing index; Bloomberg comfort index; pending home sales; earnings from ConArga Foods (NYSE: CAG).

Friday: Consumer sentiment; earnings from BlackBerry maker Research in Motion (Nasdaq: BBRY).

The IPO calendar heats up with 11 companies expected to debut. Notable names include: CDW Corp, HD Supply and Noodles & Company.

CDW sells computers, software and other products to businesses, government and health-care customers. The IPO is expected to raise $738 million. In a cautionary note, the company suffered annual losses for three years after going private in 2007 for $7.3 billion. Shares will trade under the symbol CDW.

HD Supply, the former commercial-supply arm of The Home Depot Inc. (NYSE: HD), is an industrial distribution company specializing in maintenance, repair and operation, infrastructure and power, and specialty construction. Bought by a trio of high profile private equity firms for $8.5 billion in 2007, HD Supply aims to raise over $1 billion. It will list with the symbol HDS.

Noodles & Company will trade under the ticker NDLS. The Colorado based company is billed as a fresh fast food chain that offers the "world's favorite noodle dishes, sandwiches, salads and soup-all prepared to specifications". The chain boasts 300 plus units and will offer 5.4 million shares priced at $13-$15 a share, raising $75 million.

For a closer look at the volatility in the stock market today, check out this Money Morning analysis by our trading expert Shah Gilani: How to Play the New Normal: Spiking Volatility

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